Government fails in fundamental duty

Troy Buswell’s kidding if he thinks stamp duty has nothing to do with people’s reluctance to buy a house.

THE state’s housing minister, Troy Buswell, doesn’t believe that stamp duty on residential home sales is a factor in declining Perth home values. Who does he think he’s fooling?

Of course a high tax on buying a house is a drag on the property market, just as any tax has a negative influence on any business decision.

But what Mr Buswell said in an interview on ABC radio last week was more than a minister trying to evade reality, repeatedly spinning the line that first-time homebuyers do not pay stamp duty.

Good as that might be for first timers, and they need all the help they can get when starting out in life, most residential property sales do attract hefty stamp duty bills.

Mr Buswell’s denial was an interesting example of how all levels of government have become hopelessly compromised in their roles as tax collectors, consumer service providers, and overall managers of the economy.

Whether it is selling water, and then telling people to stop using so much, or selling electricity and then telling people to cut back, there is a fundamental disconnect between the role of government in providing services, then taxing those services, and then saying ‘stop using those services’.

Mr Buswell’s problem is that, as housing minister, he is partly responsible for one of the Western Australian government’s biggest sources of income – stamp duty on house sales.

That means while he would like to talk-up the housing market to generate more house sales, which in turn generates higher levels of revenue for the government, on the other hand he’s the man standing in line with a baseball bat called stamp duty.

By national standards, WA does not charge high rates of stamp duty. Victoria and South Australia win that race, with stamp duty in Victoria on a $700,000 house with a modest mortgage coming in at it $38,527.40. In WA, stamp duty and mortgage registration on a property of similar value earns the government $27,715.

At times of rising property prices and easy bank loans, the stamp duty charges are absorbed into the overall deal because buyers are confident that rising property values will cancel out government costs.

When property markets reverse, which they have been for much of the past few years, buyers become much more aware of government taxes and other charges, and avoid them wherever possible; and that can mean delaying a decision to buy a property.

One of the consequences of high government charges is that a rising proportion of older owners of homes in the inner Perth suburbs are deciding to stay put in a house that is too big for them. This is partly because they don’t want to pay the high costs associated with a move to a smaller house – thus dodging real estate agent fees on the way out, and stamp duty on the way in.

Without the dead hand of stamp duty those older, and generally bigger properties, would be on the market and available for re-zoning to provide several home sites for younger families. 

In the older parts of South Perth, for example, a house selling for $1 million attracts stamp duty of $42,615.50. At a price of $1.5 million, stamp duty rises to $68,97550, and with river views and a $2 million sale price the government is in line for $94,825.50.

The issue here is not so much that Mr Buswell is totally wrong when he argues that stamp duty is not influencing residential property sales; it is why anyone would buy a high-value property and enjoy the pleasure of handing over the best part of $100,000 to a government that has done nothing to earn that money.

Misunderstanding

STAMP duty, it might be argued, is a valid way for governments to raise the taxes to pay for the electricity, water, and other services that society needs.

In providing those services, however, government gets itself into the desperately conflicted position hinted at earlier.

After a hot summer, water is the hot topic. Being a monopoly provider of fresh water to most homes in Perth, the WA government relies on its taxing powers to raise the money needed to build new sources of supply – such as dams and desalination plants – and then uses part of that money to urge people to use less water.

Electricity is in the same category. As a near-monopoly provider, the government should be in the business of trying to sell more. Instead, it sees itself as a ‘rationer’ of electricity, urging people to use less.

What the water and electricity examples expose is a deeper seated disconnect between the people who run government and the people government is supposed to serve.

Anyone dealing with government will have encountered the problem of an organisation that sees itself as separate from the people who pay for its existence – consumers who are also the taxpayers who have the pleasure of funding the organisation that’s making life hard for them.

What has happened over many years of decay is that government agencies have become prime examples of C Northcote Parkinson’s law that “work expands to fill the time allotted to it”, and the opposite of the most important rule in customer service that, “the customer is always right”.

In government, it is the organisation that is always right and the customer (the taxpayer) who is always treated as being in the wrong.

Of all the faults of government, this inability to understand that its role is to serve people, not dictate to them, is perhaps its greatest, and the major issue that separates the unsuccessful government attempts at running a business and how the private sector succeeds.

Back in business

THANKS to a reader for pointing out that one of WA’s famous mining families has made a return to the public arena. Chris Lalor, formerly of the failed Sons of Gwalia, is a director of the Canadian rare earth, tantalum and niobium explorer Pacific Wildcat Resources. Sitting alongside him is another ‘Soggies’ veteran, David Paull.

Pacific Wildcat’s primary project is the Mrima Hill prospect in Kenya, but its head office is in Vancouver and Toronto the stock market on which it is listed, and where its shares have fallen over the past 12 months from around $C1.60 to last sales at C37 cents.

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“You can only govern men by serving them. The rule is without exception.”

Victor Cousin